Beshear uses Medicaid Funds to payback his supporters….

FRANKFORT—Making good on his pledge to reinvest in K-12 education, Kentucky Gov. Steve Beshear’s biennial budget would restore public education funding to 2008 levels, with a pledge of $189 million in a budget greater than $20 billion.

But Beshear said his budget was was made possible in large part by a 5 percent cut across many state agencies.

“Two weeks ago,” Beshear began on Tuesday evening, “I stood here and signaled my intent in clear and decisive words: ‘I am determined to find money to reinvest in education,’ I said then, ‘Even if I have to make harmful cuts in other areas to do so.’ Well, that’s precisely what this two-year budget proposal does: It makes damaging cuts in many areas in order to keep Kentucky at the forefront of educational attainment in this nation.”

Beshear said restoring SEEK formula for primary and high school education funding was among his top priories in crafting the 2014-2016 budget, which will also seek to invest $100 million in broadband Internet access in Eastern Kentucky, and set aside bond revenue for construction projects for Kentucky Community and Technical College System schools.

The Cuts

Since taking office, Beshear has reduced state services by a cumulative 41 percent, for a total of $1.6 billion in cuts over the last six years. The additional cuts would likely have an effect on employee attrition, prompting layoffs, service delays and facility closures.

Most agencies would see their budgets slashed by five percent, for a total of $98.6 million. Affected agencies include military affairs, energy, tourism, and the Cabinet for Health and Family Services with the exception of some programs, including Medicaid. All executive branch offices would see their budgets cut by 5 percent. Meanwhile, Beshear’s budget would cut funding by 2.5 percent for the Kentucky State Police, KCTCS and public universities.

Funding for the Legislative Research Commission, which provides support staff to the General Assembly, would also be cut by 5 percent.

The budget includes what Beshear acknowledged to be the state’s highest ever revenue-to-debt ratio, at just over 7 percent.

Savings

He also touted over $166 million in savings because of the Affordable Care Act,attributable largely due to an expansion of Medicaid coverage by his administration.

Beshear’s budget did not include any details on tax reform, and in his speech he said that he will discuss specifics on what his proposals would be soon.

Pensions

Although Beshear’s budget includes a two percent raise for teacher salaries, it will not include any funding for the Kentucky Teachers Retirement System.

Gary Harbin, head of the KTRS, implored lawmakers at a committee hearing last year that that pension—which is underfunded by 50 percent and affects about 130,000 current and retired teachers—would need about $400 million over the next two years to bring it to solvency.

Otherwise, Harbin said, the liabilities could compound into billions of dollars in compounding liabilities.

Beshear told Kentucky Public Radio that there is no money for the teachers’ pension, but acknowledged that it would grow into a larger problem if it is not addressed.

Budget Director Jane Driskell said that the governor’s budget includes language that will “address a plan in the future” to begin funding.

Beshear’s budget would also appropriate $101.3 million and $106.3 million in 2015 and 2016, respectively, to fund the Kentucky Employee Retirement Systems pension in order to make it fiscally sound according to legislation passed by the General Assembly. Like the pension reform legislation that inspired it, Beshear’s budget does not include a mechanism for continually funding the KERS pension, which is currently funded at 23.2 percent and with an outstanding liability upwards of about $37 billion.

Other highlights

A 6.6 increase in pay for non-elected employees of the state’s judicial branch, as well as funding increases in health insurance and pension contributions. Currently, about 3,300 judicial branch employees earn less than the federal poverty level for a family of four. The current level of funding for their salaries is about $89 million.

$18 million for an expansion of pre-school services.

$500,000 for colon screenings.

Funding for three major capital projects, including a $56 million toward a$180 million renovation of the Kentucky International Convention Center; $65 million for a renovation of Lexington’s Rupp Arena; and $35 million for an expansion of the University of Kentucky Law School.

$704 million in expansion projects for 21 colleges in the KCTCS system, paid for via agency bonds.
Restoring about $111 million in cuts to child care services, including the Child Care Assistance Program. However, cuts to Kinship Care would remain in place.
$420,000 toward the Child Fatality Review Commission.
$500,000 toward domestic violence and sexual abuse shelters.
$400,000 for “SOAR Administration funding,” which Beshear described as a panel to continue implementing ideas in the Saving Our Appalachian Region conference last year.
Permits 2.5 percent in coal severance funds to be allocated to struggling coal county governments.

More than $700,000 for an expansion of the Governor’s School for the Arts and $500,000 for the Governor’s Scholar’s Program, which would permit an additional 100 new students to enter the program.